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Confirmation bias in accounting judgments: the case for International Financial Reporting Standards for small and medium‐sized enterprises

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  • Dinuja Perera
  • Parmod Chand
  • Rajni Mala

Abstract

We conduct an experiment that investigates confirmation bias in the reporting judgments of accountants when applying International Financial Reporting Standards (IFRS) for small and medium‐sized enterprises (SMEs). The results indicate that accountants’ judgments are biased towards the recognition and measurement principles of full IFRS when applying IFRS for SMEs. The results also suggest that confirmation bias in judgments can be mitigated by increasing accountants’ awareness of justification requirements and by using appropriate decision aids. These results are likely to be of interest to the 70‐plus countries that have adopted the SME standard and countries that continue to contemplate its adoption.

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  • Dinuja Perera & Parmod Chand & Rajni Mala, 2020. "Confirmation bias in accounting judgments: the case for International Financial Reporting Standards for small and medium‐sized enterprises," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(4), pages 4093-4119, December.
    • Handle: RePEc:bla:acctfi:v:60:y:2020:i:4:p:4093-4119
    DOI: 10.1111/acfi.12523
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